What Do the USPS Financial Troubles Mean for Mailbox Franchises and Independent Mailbox Store Owners?

In August 2012 USPS defaulted for the first time since 1982, unable to make a required 5.5 billion dollar payment ((http://www.huffingtonpost.com/2012/07/19/postal-service-default-retiree-payment_n_1686416.html). They defaulted again in September 2012 without paying a required 5.6 billion dollar tab ((http://www.nytimes.com/2012/10/02/us/politics/postal-service-defaults-on-more-than-5-billion-in-benefits-payments.html?_r=0). Meanwhile in order to cut costs USPS has implemented plans to consolidate their network of 461 mail processing centers in phases starting with 140 consolidations through 2013 and an additional 89 through 2014. “We revised our network consolidation timeline to provide a longer planning schedule for our customers, employees and other stakeholders, and to enable a more methodical and measured implementation,” said Patrick R. Donahoe, Postmaster General and Chief Executive Officer of the Postal Service. Also according to Donahoe USPS is projected to lose approximately $14 Billion in 2012, http://about.usps.com/news/national-releases/2012/pr12_058.htm.

USPS has implemented a plan to either close or to cut back operational hours for nearly 2,000 locations by 2014. Total mail volume over the last decade has decreased by nearly 20%, from 202.8 billion total volume in 2002 down to 168 billion in 2011 - http://about.usps.com/future-postal-service/postalfacts-2012.pdf. Factors leading to the sharp decline include to an extent the decrease mail volume, however the beginning of the decline was 2006 (Total mail volume in 2002 was 202.8 billion, 2006 was actually up to 213.1 billion and has decreased each year since). USPS puts the brunt of the decline in their service and in solvency on the 2006 Postal Accountability and Enhancement Act passed by congress which required USPS to pre-fund all retirement over the next 50 years. This includes individuals USPS has not yet hired.

Insider Discusses How This Impacts the Mail Industry:

Theresa Whitley is the General Manager of The Mail Box Stores, the largest independent non-franchise developer of mailbox stores in North America. According to her, while overall the number of deliveries for USPS may have decreased the decline in mail overall is not necessarily down as much as the USPS numbers may make it seem. Increased population and the evolution of mailbox stores into places that offer a range of services including key cutting, boxes, packing materials, office materials, and more actually offers mailbox stores the opportunity to be more successful in than even in the past according to Whitley. “We feel that the problem with the way these numbers have been presented is that it makes it look like the business of mail isn’t doing so great. This is not the case at all; the problems of USPS are utterly disconnected from the overall mailbox industry. The ability to use multiple delivery services and provide a wide range of office and mailbox services and merchandise is the key to running a more successful mailbox store. While a franchise like UPS Stores will force owners into only delivering UPS items and charge steep franchise fees and other overhead at the same time, an independent owner can use whichever delivery service their customer likes and isn’t held back by steep franchise costs. In a sense, the same is happening to USPS, obviously not in terms of franchise fees, but in terms of forced funding for retirees for the next 50 years. It’s ‘overhead’ that an independent owner isn’t saddled with.” According to Whitley, without that overhead a mailbox store can be very successful.

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